Senate agriculture panel clears Lincoln's derivatives bill

The legislation crafted by Sen. Blanche Lincoln (D-Ark.), the panel's chairwoman, would require nearly all derivatives to be subjected to a clearinghouse.

Sen. Chuck Grassley (Iowa) was the only Republican to support the
bill. Other Republicans opposed the bill, in part,
because they felt requiring all derivatives trades to go through a
clearinghouse would prove too costly.

Sen. Saxby Chambliss (R-Ga.), the committee's ranking
member, offered an amendment to limit the number of trades that would be subjected
to a clearinghouse. His measure failed, 9 to 12.

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A
clearinghouse is used to ensure the soundness of the investment that is
being traded. For example, the New York Stock Exchange is a clearinghouse for
equity trades.

The bill now heads to the Senate floor for final consideration. It is expected to be rolled into a Wall Street reform bill written by Banking Committee Chairman Chris Dodd (D-Conn.) that has dominated the Senate's politics this week.

Under Lincoln's legislation, the Treasury Department will determine what derivatives trades must go through a clearinghouse. It also would force banks to divest in derivatives trades if they want to be eligible for federal assistance. The bill also requires that foreign trades go through the clearinghouse.